The Life Insurance Corporation of India (LIC) had announced the Saral pension plan on July 1, 2021, which is a Standard Immediate Annuity plan that follows the Insurance Regulatory and Development Authority of India (IRDAI) and on payment of a lump sum the policyholder has the option of choosing between two types of annuities. The annuity rates are fixed at the commencement of the plan, and annuities are paid throughout the rest of the annuitant's lifespan. This insurance can be booked by individuals with a minimum entry age of 40 years (completed) and maximum entry age of 80 years (completed) by visiting the LIC's official website. To know how you can get regular income, keep on reading about the features and benefits of the plan.
Benefits and annuity options
Option I: Life Annuity with 100% purchase price return and Option II: Joint Life Last Survivor Annuity with 100% purchase price return on death of the last survivor are the two annuity options available under this plan. According to LIC, once annuity choice is preferred, it cannot be changed. The following are the benefits available under the two annuity options:
Benefits under Option 1: According to the preferred mode of an annuity payment, annuity payments shall be issued in arrears throughout the lifespan of the annuitant. The annuity payment terminates, and the purchase price is paid to the nominee(s)/legal heirs in full, in case of death of the annuitant.
Benefits under Option 2: As long as the annuitant and/or spouse are alive, the annuity sum will be paid in arrears according to the chosen annuity payment mode. The annuity payments will end immediately upon the death of the last survivor, and the nominee(s)/legal heirs will receive 100 percent of the purchase price.
Mode of annuity payment
Annual, half-yearly, quarterly, and monthly annuities are offered. The annuity will be paid in arrears, which means it will be paid after 1 year, 6 months, 3 months, and 1 month from the date of policy inception, based on whether the annuity is paid annually, half-yearly, quarterly, or monthly. The Minimum Purchase Price is determined by the minimum annuity the option selected, and the annuitant's age. The maximum purchasing price is limitless. Option II, the Joint Life Annuity, is exclusively available to spouses. In the case of joint life annuity choices, the age of the spouse is also subject to the minimum entry age.
|Minimum Annuity||Rs 1000 per month||Rs 3000 per quarter||Rs 6000 per half-year||Rs 12,000 per annum|
The following is the incentive for a higher purchase price via an increase in the annuity rate:
|Mode of annuity||For Rs 1000/-Purchase price (in Rs)|
|Less than 5,00,000||5,00,000 to 9,99,999||10,00,000 to 24,99,999||25,00,000 and above|
For policies purchased online, a 2% rebate in the form of an increase in the annuity will be offered.
At any time after six months from the date of initiation, if the annuitant, spouse, or any of the annuitant's children is hospitalized due to suffering from any of the specified critical illnesses, the policy can also be surrendered by submitting the required documents. If the surrender is approved, the annuitant will receive 95% of the purchase price, with a deduction of any outstanding loan amount and any loan interest. All other benefits will cease upon payment of the surrender value, and the policy will be terminated. Any adjustments to the surrender value calculation procedure may be implemented only with IRDAI's prior permission.
The loan is available at any time after six months from the policy's inception date. Under the joint-life annuity option, the loan can be acquired by the annuitant. And at the death of the annuitant, the loan can be obtained by the spouse. The maximum loan amount that can be provided under the policy should not surpass 50% of the yearly annuity amount payable under the scheme. The interest on the loan will be deducted from the annuity balance payable under the policy. The interest on the loan will accumulate at the same rate as the annuity payments under the policy, and it will be payable on the annuity's payable deadline. Any outstanding loan will be recovered from the policy's claim payouts.
The annuitant, on the other hand, has the option of repaying the loan principal at any point throughout the term of the annuity payouts. For all loans starting between May 1 and April 30, the yearly effective rate will be similar to the 10-year G-Sec rate p.a. + 200 basis points. The 10-year G-Sec rate will be determined on April 1st of the applicable fiscal year. The determined interest rate will apply for the entire period of the loan. The relevant interest rate for the loan authorized for the 12-month period starting 1 May 2021, and ending 30 April 2022, is 8.44 percent per year, valid for the entire duration of the approved or sanctioned loan.